One-Stop Borrowing on the Web

Consumer demand for a streamlined mortgage process is driving investment in online lending startups trying to deliver loans more quickly, efficiently and reliably.

The newest generation of home buyers, the so-called millennials born between the early 1980s and the late 1990s, wants “ease of use and transparency,” said Jason van den Brand, the chief executive of Lenda in San Francisco, which has automated the entire loan process. “They do not want to go through the same methods that their parents went through.”

In the same way that buyers increasingly rely on the Internet for house hunting, so too are they looking to secure financing online. In a national survey released in January by Discover Home Loans, more than half of home buyers said they filled out their mortgage application online; more than 70 percent said they submitted at least some documents to their lender via email, app or a website.

Consumers searching for a mortgage online often use a lead-generation site like Bankrate or LendingTree, where lenders compete for borrowers’ business. But Mr. van den Brand says such sites “are just perpetuating the same process” of working back and forth with someone by phone, paying commissions and other fees and dealing with lots of paperwork.

In contrast, he said, Lenda, which started in 2013, provides borrowers with several rate quotes, then allows them to complete the process online, without having to pay application or processing fees. “We do have customer service and support, but most people don’t need that,” he said. “Most can select their rate quote, fill out their application, upload their documents and electronically sign the paperwork right on the website.” (The signing of the final documents requiring notarization is done offline.)

Lenda currently lends only in California and Washington State, and is limited to refinance loans. But Mr. van den Brand said the company would add purchase loans this year, and recently raised another $1.5 million in seed funding to support expansion into other states. He expects Lenda to be nationwide by mid-2016.

Another San Francisco startup, Sindeo (Greek for “connect”), is structured more like an online brokerage, although Nick Stamos, the chief executive, much prefers the term “marketplace.” The company plans to use “technology plus people,” he said, to “bring education and mortgage literacy” to the process.

Sindeo’s loan officers act as “mortgage advisers” to help buyers find a loan “that makes the most sense” for them from within Sindeo’s network of 38 lenders. Mr. Stamos says he hopes to build that number to 70 by the end of the year, bringing in known retail brands and specialty lenders.

To prevent advisers from paying more attention to borrowers seeking the largest loan amounts, they are paid a flat fee for every loan that closes, and quarterly bonuses based on customer satisfaction.

The company is still building its online mortgage technology; customers will be able to apply online in April, Mr. Stamos said. Currently operating in California, Sindeo recently raised $6.5 million in funding and will expand to five more Western states in the first half of the year, Mr. Stamos said. The New York area is targeted for the latter half of the year.

Lenders nationwide are adopting e-signing technology in preparation for new rules effective in August that require them to provide borrowers with final documents at least three days before closing. But Mr. Stamos predicts it could be several years before many of them use e-closings as a matter of course. Startups are better situated in that regard, he said, because “we can build our platform based on the future and not the past.”